Credit Cards and Cash Still Favored Over Digital Wallets

The Harris Poll of 2,383 adults wonders if after holiday shopping, or ordering a drink at your favorite coffee shop, you settle the bill with a simple tap of your smartphone against the merchant's
point-of-service terminal. The technology is already here, albeit at an emerging level, says the report about the poll findings.

13% of Americans indicate that they have either paid in this manner
themselves (4%) or witnessed it firsthand (8%), with predictably stronger experience levels among smartphone owners (18%, 7% and 11%, respectively).

Americans feel that this is just the first
indicator of a fundamental shift in how they are likely to pay for goods and services in the years to come, with over six in ten indicating that they believe smartphone payments will eventually
replace both payment card (66%) and cash (61%) transactions for a majority of purchases.

While many Americans perceive this change in payment culture is a likely eventuality, considerably
fewer appear to perceive it as imminent: although 66% believe smartphone payments will eventually replace payment card transactions, only 32% believe this will happen in less than five years.
Similarly, though 61% of Americans believe smartphone payments will eventually replace cash for the majority of purchases, only 26% think this will happen in less than five years.

Expected Time When Smartphone Payments Will Replace Cards/Cash For Majority Of
Purchases (Base: All U.S. adults; % of Group)

Total

Smartphone Users

Payment Card Transactions

Ever

66%

76%

In
less than 5 years

32

38

Within the next year

2

2

1 year to less than 3 years

12

14

3 years to less than 5 years

19

21

5 years to less than 10 years

19

21

10 years or more

15

17

Never

34

24

Cash Transactions

Ever

61

70

In less than 5 years

26

31

Within the next year

2

2

1 year to less
than 3 years

9

12

3 years to less than 5 years

16

18

5 years to less than 10 years

18

21

10 years or more

17

18

Never

39

30

Source: Harris Interactive, January 2014

Despite the majority of Americans indicating that such changes
to our collective purchasing habits are ahead, few display a strong interest in replacing their own cash or card transactions with the a smartphone. Although 27% of Americans, and 44% of smartphone
users report overall interest in being able to use their smartphone to process in-person payments, far fewer specify being veryinterested in doing so (8% and 16%, respectively).
Nonetheless, interest levels point to some segments which are most interested overall in this ability:

32% of men are significantly more interested in this technology than women (22%)

38% of those in households with children
also display considerably stronger overall interest than those in households with none (22%)

Among those who indicate being either not very or not at all interested in being able to
make smartphone payments, security is a clear factor. 51% say they don't want to store sensitive information on their phone, and 40% don't want to transmit sensitive information to a merchant's
device. Another impediment is the simple matter of smartphone ownership, with 50% indicating they are not interested in doing so because they don't use a smartphone. The other top impediment speaks to
a deeper issue facing the mobile payment industry. 52% of those not interested indicate that they simply don't see any reason to switch from cash or payment cards.

Looking specifically
at smartphone owners not interested in using their devices to process payments, 68% don't want to store sensitive information on their phones, 51% don't want to transmit sensitive information to the
merchant's device, and 62% don't see any reason at all to switch

While 28% of Americans, and 40% of smartphone owners indicate that, being able to make mobile payments while still
taking advantage of their existing credit card reward programs, would make them more interested in doing so, only 9% and 15% respectively, specify that they would be much more interested.
Moreover, only 1% of those not interested in paying with smartphones indicate that this would make them much more so.

When asked how the ability to use their smartphones as a "digital
wallet" with electronic versions of all the identifications, loyalty program cards and other documentation normally carried in a wallet, only 8% of Americans and 12% of smartphone owners indicate it
would make them much more interested. Only 2% of those not interested in paying with smartphones overall indicate that this would make them much more interested.

Reason For Lack Of Interest In Using A Smartphone To Process Payments (Multiple Response
OK)

Worried that my smartphone's battery will run
out and leave me unable to pay

15

Don't understand how to use it

8

Don't know where I can use it

7

Something else

7

Source: Harris Interactive, January 2014

The report concludes by noting that when debit cards came to prominence, they did so by responding to a
genuine consumer desire by combining the use-anywhere convenience of a credit card with the ability to draw from money in users' checking accounts instead of incurring debt. Thus far, the mobile
payment industry has yet to find a similar "in" with consumers.